New Uses of Old Works: When May a Licensee Exploit Previously Licensed Content without the Consent of the Copyright Owner?

by Andrew Berger

New uses of old works are everywhere. Our cell phone wallpaper may be a wonderful family photo taken years ago. An ebook lets us read and bookmark a favorite novel. But when a new product exploits these works without the permission of the copyright holder, litigation is likely, especially where the new use has significant economic value.

The parties to the litigation are most often the copyright holder who licensed the copyrighted work and the licensee who seeks to exploit the work in the new product. The licensor claims that the license does not contemplate the new use. In response, the licensee asserts the new use is simply an evolutionary in the presentation of the work and is therefore permitted by the license.

Determining the scope of rights granted by a license usually turns on the intent of the parties. But in most new use cases there was no intent. When the license was executed years before, the parties to the license likely never thought about the new use. In the absence of intent, how does a court resolve a new use issue where the license fails to expressly authorize the use?

Rosetta Most Recent New Use Case

The most recent new use case in the Second Circuit, Random House, Inc. v. Rosetta Books LLC, 150 F.Supp.2d 613 (S.D.N.Y. 2001), aff’d, 283 F.3d 490 (2d Cir. 2002) determined the scope of the license by focusing on the language of the copyright holder’s grant of rights. Rosetta held that Random House’s license, to “print, publish, and sell” novels by Kurt Vonnegut and William Styron “in book form,” did not give the publisher the right to distribute these works as ebooks.

Continuing Controversy

Ironically, Random House recently announced that it had ebook rights to the same older works of Messrs. Vonnegut and Styron who were successful in Rosetta. Random House’s chairman, by memo dated December 11, 2009, stated that it “considers contracts that grant the exclusive rights to publish ‘in book form’ … to include the exclusive right to publish in electronic book publishing formats.” The memo made no reference to Rosetta.

The continuing popularity of ebooks will likely spur further litigation between authors and publishers over the scope of their license agreements. Thus, Rosetta offers a convenient road map to those who need or wish to predict a new use outcome.

Decision in Rosetta

In Rosetta, the district court found that three authors, who had licensed Random House the right to “print, publish, and sell” their novels “in book form,” had not thereby given Random House electronic rights to those novels.

The district court first noted that the licenses to Random House distinguished between the “pure content—i.e. ‘the work’– and the format of display—‘in book form.’” The court stated that Random House’s own dictionary “defines a ‘book’ as ‘a written or printed work … usually on sheets of paper’ … and defines ‘form’ as ‘external appearance of a clearly defined area.’”

The court then noted that the licenses gave Random House additional rights to “publish book club editions, reprint editions [and] abridged forms.” The court concluded that Random House would not have required these additional rights “if the phrase ‘in book form’” was as broad as Random House contended and “encompassed all [these] types of books.” The court also relied on trade usage, noting that the phrase to “‘print … in book form’ is understood in the publishing industry … to be a ‘limited’ grant’” and “generally” refers to a “hardcover trade book.”

Rosetta stated the grant language in those cases “was far broader than here.” The court added that the “‘new use’ in those cases–i.e. display of a motion picture on television [Bartsch] or videocassette [Boosey]–fell squarely within the same medium as the original grant.” In contrast, Rosetta found the new use at issue, “electronic digital signals sent over the internet–is a separate medium from the original use–printed words on paper.” The court relied in part on Random House’s expert who concluded “that the media [analog and digital] are distinct because information stored digitally can be manipulated in ways that analog information cannot.”

The court, mindful of avoiding an approach that “‘tilts against licensees,’” stated “that the policy rationale of encouraging development in new technology” was “at least as well served by finding that the licensors” retain ebook rights. “In the 21st century it cannot be said that licensees such as book publishers and movie producers are ipso facto more likely to make advances in digital technology than start-up companies.”

Adding little to the district court’s reasoning, the Second Circuit held the denial of Random House’s request for an injunction was not an abuse of discretion.

Guidance from the New Use Cases

These three new use cases suggest the following. First, a licensee may use a distribution format that was not included in the license if the language of the license may reasonably be read to cover the new distribution format. Second, licensees are likely to prevail if they can show that the new channel of distribution might have been foreseen by the licensor at the time the license was executed and therefore should have been excluded by the licensor. Third, the new use may reasonably be said to fall within the medium described in the license if the grant of rights in the license was broad. Finally, trade usage or industry custom may be used to limit the scope of the license.

One Response to “New Uses of Old Works: When May a Licensee Exploit Previously Licensed Content without the Consent of the Copyright Owner?”

[…] Random House Allows William Styron’s Estate to Publish Electronically by Andrew Berger Random House has now apparently reversed course with respect to electronic rights to William Styron’s earlier works. A decade ago Random House claimed it had ebook rights to those works. But Random House, Inc. v. Rosetta Books LLC, 150 F.Supp.2d 613 (S.D.N.Y. 2001), aff’d, 283 F.3d 490 (2d Cir. 2002), held otherwise. Judge Stein found that Random House’s license agreements with Styron, giving Random the right to “print, publish, and sell” Styron’s older works “in book form,” did not give the publisher the right to distribute these works as ebooks. See my earlier post on this subject here. […]